$112 Million Promised to College Turns Out to Be All Promise and No Cash

MORAGA, Calif., Sept. 24 – Looking back, it all seems too good to have been true. But until a few weeks ago, almost everyone here believed it.

Seven years ago, a first-time donor pledged the largest gift in the history of Saint Mary’s College, a small liberal arts school run by Christian Brothers in Moraga, a secluded town in the San Francisco Bay area. The college’s origins date back to the state’s early history.

The donor, who had no previous connection to the college, insisted upon strict anonymity, with only the college president and select others in the know. The promised gift started at $25 million and was increased on nine occasions over the next few years to a total of $112 million, putting Saint Mary’s in an elite club of colleges and universities nationwide to receive such a substantial donation.

“It was accepted on the basis of faith,” said Dr. Giles Miller, who was a member of the college’s board of trustees at the time of the pledges and has since retired. “Faith is a big thing in religion.”

Based on the promise, the college built a $25 million, three-story science center and began plans for several other buildings and major renovations on campus.

“Thanks to the generosity of an anonymous donor, all Saint Mary’s students have the unique opportunity to experience science instruction and research firsthand,” the college president, Brother Craig J. Franz, a marine biologist, said at the science building’s dedication ceremony in 2000. “It is a gift that goes directly to our goal of enhancing student learning.”

But there was no gift, not then or now. In a letter to the students and staff, college officials revealed last month that the donor had not made good on a penny of the $112 million, suggesting that there had been “a serious act of deception against Saint Mary’s.”

The science center had been paid for with bond money in anticipation of receiving the donation. Now the bond must be covered with other funds. While insisting that the college’s finances remained sound, the officials warned that future construction projects would have to be seriously scaled back.

Law enforcement authorities started a criminal investigation in early August, and the college’s board named a team of its own led by a former federal prosecutor, Neal J. Stephens, to delve into the matter. This week, with those investigations still under way and the campus increasingly restless for answers, Brother Craig, 50, announced that he would step down in January after seven years.

In an interview on Friday, Brother Craig said he suspected that “I did make some mistake at some point along the line,” but he said he was waiting for the college’s internal investigation to determine precisely what went wrong. He said his departure resulted from his hope that a new president would be better able to heal the wounds.

“People are angry that the college got involved in this,” he said. “They are angry at the college that we wasted resources having faculty and staff plan buildings that are not to be built.”

The Contra Costa County district attorney’s office says the college unwittingly became entangled in what appears to have been a real estate fraud that involved more than 120 investors and about $9 million that has disappeared. Deputy District Attorney Steven Bolen said Brother Craig’s only crime seems to have been that he believed in the series of pledges.

As for the pledges never being paid, Mr. Bolen said, “Saint Mary’s may have detrimentally relied on the promise, but there is no crime there.”

The $112 million pledged was to have come from the donor’s profits on the real estate scheme, which purported to involve buying property from PepsiCo occupied by fast-food restaurants and leasing the restaurants back to PepsiCo. Mr. Bolen that said PepsiCo knew nothing of the scheme, and that documents written to investors on PepsiCo letterhead were fabrications.

The authorities have identified two men at the center of their investigation. They are Saint Mary’s mysterious benefactor, identified as Conrad Colbrandt, a businessman who was named to the college’s board of regents in 2000; and a business associate of Mr. Colbrandt, John Banker, an 83-year-old former real estate broker whose license was revoked in 1980 after he pleaded guilty to grand theft and forgery in a real estate case and was sentenced to five years in prison.

Mr. Bolen said it appeared that Mr. Banker fled to Mexico “in a hurry” early last month, leaving his apartment in Walnut Creek in such a rush that he did not pay the rent or pack up his belongings. A lawyer for Mr. Colbrandt contacted the authorities and reported that Mr. Banker had disappeared and that the invested money was also gone, he said.

“He is kind of the linchpin of the whole investigation,” Mr. Bolen said of Mr. Colbrandt. “At this point we are not sure what Colbrandt’s role was.”

Mr. Colbrandt’s lawyer, Richard A. Madsen Jr., said Mr. Colbrandt was cooperating fully with both the criminal investigation and the Saint Mary’s investigation. He said Mr. Colbrandt “feels absolutely terrible about what happened,” but only realized the investment scheme was fraudulent in late July.

“My client is the one that notified Saint Mary’s College that it appeared the pledge could not be made based on the wrongdoing of Mr. Banker,” Mr. Madsen said. “Mr. Colbrandt is completely without fault here.”

For many at the college, the criminal investigation is secondary to the internal review, which many hope will explain the relationship between Brother Craig and Mr. Colbrandt and how it was that the college never insisted on even a small down payment on the $112 million.

Also, at the request of Mr. Colbrandt, a college spokeswoman said, the new science center was named J. C. Gatehouse Hall, with the initials representing the first names of Mr. Banker and Mr. Colbrandt. Many people at Saint Mary’s had assumed they stood for Jesus Christ.

“Nobody asked the hard questions,” said Dr. Miller, the former trustee. “At the time, they were lulled into a position of security: don’t ask, don’t tell. That is what happened here.”

A former chief financial officer at the college, Lionel Chan, who left Saint Mary’s in 1999, said Brother Craig was given the benefit of the doubt because he was new and people wanted him to succeed.

Nicholas G. Moore, the chairman of the board of trustees, said he tried to talk Brother Craig out of leaving but ultimately accepted the resignation. Even with the canceled pledge, Mr. Moore said, the college “has never been in better shape” financially, and he said he believed Brother Craig could have weathered the storm. “The college is doing fine,” Mr. Moore said.

Brother Mel Anderson, who served as Saint Mary’s president for 28 years before stepping down in 1997, said the only other time the college suffered such a serious setback in pledges was shortly after it relocated in 1928 to Moraga from nearby Oakland, where it had been since 1889. The college was founded in 1863 in San Francisco and now has 2,500 undergraduates and 2,000 graduate and other students.

Brother Mel said the Moraga campus was still under construction when the stock market crashed in 1929, leading to untold numbers of unfulfilled pledges. Several years later the college declared bankruptcy and was sold at an auction, he said.

“That time you knew the reason people couldn’t pay,” Brother Mel said.